Who is the beneficiary of your 401k, profit sharing and pension plans?

Your answer would probably be, “Myself and my family”.

But, would it surprise you to learn that there is more than a 50% chance that you have named your physician, your hospital, and a cast of nurses, therapists and caregivers as co-beneficiaries of your retirement plans?

Here is why; almost all statistics say that over 50% of all Americans will need long term health care at some time during their lives(1). For some the costs will be inconsequential; for others they can run into the hundreds of thousands – even millions – of dollars because of conditions such as strokes, debilitating accidents or even Alzheimer’s.

Where will the money come from to for our care ?

To answer that question, imagine this: Jim Smith has accumulated $2,000,000 in his retirement plans and retires with an after tax income of $100,000 a year. Suddenly he has a stroke and needs a caregiver at home 10 hours a day, 365 days a year. The result:

• Jim’s retirement income $ 100,000


• Jim’s health care costs(2) $ 73,000


• Net income for Jim’s family $ 27,000

Jim’s family is now between the proverbial rock and a hard place:

• They change their lifestyles and reduce their standard of living


• They start liquidating Jim’s retirement plan account – money he had earmarked for their future financial security

Of course this will never happen to us – but what if we are wrong?

The moral of the story: Without an effective Wealth Preservation Plan in place there is a good chance that you will give away some of your retirement assets to pay for the costs of extended health care.

(1) 70% of all Americans will need some type of long term health care during their lifetimes 10/2008 (www.longtermcare.gov/ltc).
(2) See 2008 MetLife Mature Market Surveys on the cost of long term health care.